The SMH has an interesting headline for their article on the impasse between the East Timorese government and Woodside (and partners) over the location of the LNG plant to process gas from the Sunrise field in the Timor Sea - Impasse on deal to plunder Timor's gas riches. Unfortunately for the Timorese, there is still plenty of Australian security in the country and, if what happened to Mari Alkatiri is any guide, regime change is always an option.

A serious dispute has broken out between Australian oil company Woodside and the East Timorese government over the processing of gas from the Greater Sunrise field in the Timor Sea. The dispute looks set to lock up one of the richest gas fields in the region and cost Woodside hundreds of millions of dollars already spent on research and development.

At the heart of the dispute is East Timor's claim for natural gas taken from the joint Australian-East Timorese field to be processed into LNG in East Timor. Woodside has rejected that option, saying it wants to process the gas on a floating platform in the Timor Sea. The East Timorese government has said, however, that its position is not negotiable and that without an agreement on refining in East Timor there will be no deal to proceed with drilling.

Both the floating platform and on-shore processing is likely to cost about $5 billion to develop, which is the equivalent of East Timor's current financial reserves from which it derives interest to, in effect, run the country. The profit from the project, however, is expected to run into tens of billions of dollars.

East Timor's claim to have processing undertaken on-shore is similar, in essence, to the Australian government's extended tax on mining companies. It wants its people to receive greater benefit from national resources that will otherwise enrich a foreign-owned company. It also says that Australia already benefits from an earlier processing agreement and that it is now East Timor's turn to benefit.

East Timor sees its economic future built upon the oil and gas reserves in the Timor Sea. An on-shore processing plant would mean not just the initial massive investment, but will further require establishing related infrastructure, meaning significant secondary economic benefits, as well as technology transfers and the training of local workers.

This, the East Timorese government believes, would herald the start of East Timor's own petrochemical industry and its chance to leap-frog the development cycle from little more than subsistence to industrialised status.